The founder of the credit counseling firm AmeriDebt on Monday agreed to pay $35 million to settle suits filed by regulators and former customers over $172 million in allegedly hidden fees the company collected from financially strapped debtors.

The money that Andris Pukke pays would go to a fund that will be used to reimburse the roughly 300,000 customers the Federal Trade Commission claimed AmeriDebt Inc. deceived.

Pukke, who made a fortune off businesses that catered to customers in debt, is also barred from working in credit counseling, debt management or telemarketing as part of the settlement.

The agreement came a day before a federal court in Greenbelt was set to hear the FTC's lawsuit against Pukke (PUCK'-ee) and a class action lawsuit filed against him by former AmeriDebt customers. The payment covers both suits, according to the FTC.

The agreement is subject to approval by the federal judge as well as by the court hearing Pukke's personal bankruptcy filing.

Pukke must contribute almost all his personal assets, including two mansions, to come up with the $35 million, according to the FTC. A court appointed receiver is searching for Pukke's assets to pay the fund. As of June, the receiver had located about $16 million, according to Lucy Morris, the lead FTC attorney on the case.

Pukke does not admit any wrongdoing in the settlement and his attorney said Pukke still vigorously denies the FTC charges.

"Mr. Pukke continues to believe that these allegations are completely unfounded and that consumers were neither misled nor injured by Mr. Pukke or his credit counseling business," said Geoffrey Irwin. "This settlement allows Mr. Pukke to avoid the vagaries of trial. He can put these allegations behind him and move on with his life."

The FTC filed its lawsuit against Germantown-based AmeriDebt and Pukke in 2003, part of a push by federal regulators to crack down on aggressive nonprofit credit counseling firms accused of cheating customers who sought help with paying their bills. Some firms were accused of using their tax exempt status to shield hidden for-profit activities and dupe customers who felt more comfortable working with a nonprofit.

"AmeriDebt was among the largest if not the largest credit counseling agency at one time," Morris said. "This is a huge case and a huge judgment."

AmeriDebt promised to help customers lower their monthly payments by consolidating their loans and helping customers get lower interest rates. It also told customers they could get counseling on how to manage debt.

But the FTC alleged the first payment customers made, often several hundred dollars that they believed would go toward paying down their debt, was instead classified by AmeriDebt as a "contribution" that went to the firm. Customers were also pushed to make monthly contributions to AmeriDebt.

The FTC said AmeriDebt did not properly disclose those fees to customers and that many were confused about where their money was going. Customers were enrolled in debt management plans but never given the credit counseling AmeriDebt said it would provide.

J. Neil Sherouse, a Gainesville, Fla. consumer who was scheduled to testify for the FTC, signed up with AmeriDebt in 2001 after his wife lost her job and their credit card bills ballooned. He estimates he spent about $3,350 in fees during the three years he was with AmeriDebt. Sherouse is skeptical he will get any back, but was satisfied with the settlement.

"This was a very vulnerable time for us," he said. "They capitalized on that vulnerability."

Regulators said much of the fees AmeriDebt collected went to a for-profit sister company controlled by Pukke called DebtWorks. Pukke allegedly used much of that money to fund a lavish lifestyle, with mansions in Maryland, Florida and California.

AmeriDebt filed for bankruptcy in 2004. The company's remaining clients have been shifted to another credit counseling firm.

Pukke also filed for bankruptcy in July, but a federal judge froze his assets after the FTC claimed he was shifting money to offshore accounts to protect them from regulators. Monday's settlement requires Pukke to cooperate with the receiver. He is allowed to use about $425,000 to pay for his lawyers and living expenses.

Pukke's wife, Pamela, who was named in the case because she benefited indirectly from the alleged scheme, settled with the FTC late last month. Several states reached settlements with AmeriDebt in bankruptcy court last year. The Internal Revenue Service and U.S. Postal Service are also probing possible wrongdoing by Pukke's companies.

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